Bumpy ride for Bitcoin investors
NYSE owner’s listing of its Bakkt Bitcoin futures roils crypto market
LONDON/ NEW YORK • Bitcoin struggled on Wednesday to recover from the three-month lows it reached a day earlier, moves that traders blamed on a lukewarm reception for a futures product from the owner of the New York Stock Exchange.
Bitcoin, the biggest cryptocurrency by market capitalization, fell two per cent to US$8,364 in early trading. It plunged as much as 15 per cent on Tuesday, briefly breaching US$ 8,000, in its biggest one- day drop since July 16, before recovering some of its losses.
The Intercontinental Exchange, the NYSE owner, listed its Bakkt Bitcoin futures on Monday, which many crypto enthusiasts expected would lead to an influx of money from larger investors.
The opening of Bakkt was regularly cited for Bitcoin’s steep gains earlier in the year.
Bakkt said 166 contracts traded hands on Tuesday — unimpressive volume, analysts and traders said. Some interpreted the tepid takeup as evidence of continued hesitation toward cryptocurrencies from larger investors.
“It’s one thing to give institutional money access to BTC (Bitcoin),” said Jamie Farquhar, portfolio manager at crypto firm NKB Group in London. “It’s another thing to make them comfortable enough to actually buy it.”
Bitcoin futures offered by exchanges regulated in financial centres have boomed this year, partly driven by investors seeking exposure to crypto but seeking protection from the heists, hacks and volatility that have plagued the emerging sector.
Some of the exchanges offering Bitcoin futures are also planning to introduce more complex derivatives, offering traders another way to hedge their risk in the cryptocurrency.
CME Group, the world’s largest futures exchange operator, is planning to launch options on its Bitcoin futures contracts in the first quarter of 2020.
Some market players said Bitcoin’s fall on Tuesday was also partly caused by technical factors — often a big catalyst for price moves in an emerging asset plagued by poor price discovery and lacking in fundamentals.
Bitcoin has been on a downward trend in recent weeks, plunging about 35 per cent since early August. A highly skeptical response by regulators and politicians to Libra, Facebook’s planned cryptocurrency, was one reason for the decline.
While Bitcoin is holding above the US$8,000 level, a breach below would test its 200- day moving average support, which sits around US$7,000. In addition, the GTI Global Strength Indicator — a measure of upward and downward movements of successive closing prices — shows the coin hasn’t dipped yet into oversold territory, which could be a sign of further declines ahead.